6 May 2005

To	Heads of HEFCE-funded higher education institutions Heads of universities in Northern Ireland

Direct Line	0117 931 7300
Direct Fax	0117 931 7203

Circular letter number 10/2005

For further information contact Heather Williams, tel 0117 931 7113, e-mail h.williams@hefce.ac.uk

Dear Vice-Chancellor or Principal

Revisions to annual TRAC reporting: guidance on income allocation

1. This letter provides guidance on the methods for allocating income across the activity categories in the Transparent Approach to Costing (TRAC). It also gives an update on the actions arising from the review of financial reporting and activity costing (FRAC) (HEFCE Circular letter 26/2003).

2. Following the recommendations from the FRAC report, the UK higher education funding councils established a small working group to advise on guidance for income allocation by TRAC activity categories. The guidance has been prepared by JM Consulting Ltd and has been tested with a number of higher education institutions (HEIs). A copy is attached at Annex A.

3. The guidance includes the revised form for annual reporting under TRAC as well as two spreadsheets to assist with classification of income. The second of these provides more detail on the allocation of funding council recurrent grants and special funding. This schedule will be updated annually to reflect any changes in grants.

4. The new reporting requirements will apply for reporting on academic year 2004-05. The deadline for submission of returns will be 31 January 2006.

Update on other activities arising from the FRAC report

5. The FRAC report confirmed that the conceptual bases continue to be valid for the infrastructure adjustment and the cost of capital employed adjustment. However, it recommended that there was a need to refine or reaffirm certain elements of the methods for calculating the adjustments. This work is continuing, and a report on revisions to the methods for calculating the economic adjustments will be published later in the year, in time for taking into account when reporting for the academic year 2004-05 in January 2006.

6. Further, the FRAC report recommended that the funding councils should consider options to provide further assurance that the implementation of TRAC is fair and reasonable, and robust. In response, the UK funding councils and the Research Councils established a joint quality assurance process to provide independent assurance to a range of stakeholders (including HE funding councils, Research Councils, HM Treasury, and other government departments) on the robustness of the embedding of the original TRAC implementation within HEIs. Quality assurance (QA) reviews have been undertaken at all UK HEIs by KPMG on behalf of the funding councils and Research Councils. The assurance process included the use of a benchmarking tool to assist HEIs in understanding their data. An interim report summarising the key findings from the QA work up to 31 July 2004 was published in November 2004 (HEFCE Circular letter 20/2004). A final report on the findings across all UK HEIs will be published later in the year.

7. For the longer term, HEFCE is working with the other HE funding councils, the Research Councils and the Office of Science and Technology to consider how best to meet the quality assurance and validation arrangements that research sponsors and other stakeholders will require for the future. Further information about the development of the joint assurance processes will be provided later in the year.

Yours sincerely

Sir Howard Newby
Chief Executive

Download

Annex A The annual TRAC return: guidance on the allocation of income
[ MS Word 46K | Zipped Word 10K | Adobe PDF 33K | Zipped PDF 22K ]

Figure 1: annual TRAC return
[ MS Excel 16K | Zipped Excel 5K | Adobe PDF 12K | Zipped PDF 8K ]

Schedule
[ MS Excel 129K | Zipped Excel 23K | Adobe PDF 23K | Zipped PDF 16K ]